External solicitors
David Casey, formerly a manager in the lending department of Anglo Irish Bank, gave evidence yesterday (16 November). He confirmed that the institution used external solicitors to perfect its security.
Casey confirmed to Mark Lynam SC, defending, that he was not involved at the time, but took over management of these loans at a later stage.
He told Lynam that it would have been “common practice” in any institution to refuse a loan where there was lending with other banks.
Lynam put it to Casey that this was his opinion.
“I don’t think so. I think it’s a statement of fact,” he replied.
Lynam noted that his client faced no charges in relation to Anglo Irish Bank, and suggested that the prosecution would say that Lynn's intentions were “effectively scuppered” by the use of external solicitors.
Casey said that he did not believe that Lynn had asked to use his own solicitors, but accepted that Lynn would have been aware of the bank's requirements, as it had lent to him in 2005.
Loan ‘wouldn’t have stood out’
Lynam told the witness that his client would give evidence that he had a “good personal relationship” with the then chairperson of Anglo Irish Bank, Sean Fitzpatrick, and that he was aware of Lynn's lending.
Casey said that he didn't know, but added: “I wouldn’t have thought the chairman [of the bank] would have had intimate knowledge of any one customer.”
Lynam noted that the bank had provided loans of €11 million to his client in one year. Casey replied that that was a “significant” amount of money, but that it wasn't “unusual” or “high-value” for the time.
He accepted that his answer was based on his sense of procedure, and that he was “not aware” of any conversations between Lynn and Fitzpatrick.
Casey told prosecuting counsel that a loan of €11 million during the period in question, while significant, “wouldn’t have stood out”.
€5.5m PTSB loan not drawn down
Sean Alger, former head of the commercial division at Permanent TSB, told Karl Finnegan SC, prosecuting, that he was a member of the bank's internal credit committee, which approved a loan to Lynn in May 2007.
Alger was taken through a mixture of documents – including credit committee memos and emails. He agreed that the memo of a credit-committee meeting on 30 May 2007 stated that it had approved two lending facilities of €3.72 million for residential investment, and a €5.5 million commercial-mortgage facility.
The memo stated that the bank had an existing exposure of around €4.9 million to Lynn, meaning that these proposed new loans would bring the bank's total exposure to approximately €14 million.
Alger agreed that the €5.5 million loan facility was not necessarily for residential-mortgage investment. The jury was told that this loan for €5.5 million was never drawn down.
Alger said that the loans were approved on certain conditions – including the registration of a first legal charge over the particular properties.
‘Negligent’ suggestion rejected
He told Comiskey O'Keeffe that he “absolutely” did not accept that he, his colleagues or the bank were negligent in their lending to Lynn.
Comiskey O'Keefe noted that the jury had been shown an unsigned version of the credit-committee memo, but Alger told Lynn's last trial that there was also a signed version.
The witness said he that “expected” that there was also a paper version of the memo, but wasn't familiar with the bank's processes for archiving records.
He told defence counsel he was not asked to take part in any internal investigation or audit about the bank's lending to Lynn.
Alger agreed with Comiskey O'Keeffe that he could approve loans up to his “personal lending discretion” without escalating them to the credit committee. He said that he thought he had authority to approve up to €2 million, but said that he could not recall specifically.
He agreed that he had approved a loan of €1.9 million to Lynn in 2005.
He told Comiskey O'Keeffe that he could not delegate his “personal lending discretion” to a credit assessor, nor could someone with a higher discretion delegate theirs to him. He said the structure governing delegated authority was decided at board level.
Previous loans
Alger said that he was a member of the credit committee, which sat once a week, in 2007, and that its members were separate from the managers presenting a proposed loan for approval.
He outlined some of the issues considered by the credit committee – including creditworthiness and a borrower's repayment capacity.
He added that the committee would assess a borrower's creditworthiness from a risk perspective, using several factors. They would also consider any loans that a borrower might already have with the bank.
Comiskey O'Keeffe noted that one of the conditions of a loan approved in April 2007 for €4.9 million was that his client had to clear an existing loan to the bank, but there was no specific undertaking in relation to this, suggesting that the debt was cleared using another method.
Alger said that, generally, the solicitor's letter of undertaking would include a requirement to discharge any outstanding debts, but he did not know the details in this case.
‘Obligation’ on borrower
Comiskey O'Keeffe put it to him that he was “mistaken”, and that there was no requirement in the solicitor's undertaking to clear outstanding debt. Alger said that he had worked in banking “for a long time” and was aware of the security process.
He agreed with Judge Martin Nolan that it was his understanding that part of the April loan was to repay an existing loan to Lynn. He said that it would be an “obligation” on the borrower to fulfil the conditions of a loan approval.
Comiskey O'Keeffe told Alger that his client would give evidence that he took various loans from the bank between the late 1990s and 2005, some of which included conditions to repay earlier lending, but that this was not done.
He said that his client would say that he met two bank officials before 2005 and challenged them on this condition. Rather than repay the loans, he “carried the payments”, and these two bank officials were aware of this situation.
Track record
Comiskey O'Keeffe suggested that, if an outstanding balance on existing loans should have been cleared “on two or three occasions in the past”, this should have been brought to the attention of the credit committee. He put it to Alger that the documents showed that his client “did not have a good track record”, as he had not complied with conditions to repay his earlier loans.
Alger disputed this, and said that the loan documents showed that Lynn was not in default on his earlier loans, but that these were incorporated into his later lending with the bank. He said that the loan in April 2007 incorporated earlier lending of €1.9 million.
He agreed with Finnegan, during re-examination, that it was not suggested to the credit committee that the loans to Lynn were for another purpose, such as overseas property development.
He said that the documents he was shown while giving evidence showed that the facility was to purchase residential investment properties and to “clear existing debt”.
Finnegan also showed Alger an internal email between other bank officials from April 2007, which stated that the redemption of an earlier loan for €1.9 million was delayed due to “confusion” in Lynn's office, and that he was “embarrassed and annoyed” by this.
Alger said that he couldn't recall if this email was disclosed to the credit committee at the time.
Internal reports
James Brady, assistant manager in Permanent TSB's financial-crime and loss unit, confirmed to Finnegan that the bank had received a court order earlier this year in relation to the bank’s internal reports on its dealings with Lynn in 2007.
He said that he “checked the systems I had access to” but could not find any internal reports of this kind.
Brady said that he had also instructed the bank’s IT department to check for email correspondence between the bank and email addresses for Lynn at Kendar, between January 2007 and June 2008.
He said that the IT department had advised him that it was unable to locate any email correspondence between the bank and these email addresses during that time period.
Under cross-examination by Paul Comiskey O'Keeffe, Brady said that he had checked the systems he had access to – including a database of file storage.
He didn't come across any information about an internal investigation, he said, and didn't know if this would generate an internal report.
Brady said that he didn't know if an internal investigation had taken place between the dates of the last trial and last February. He also confirmed that his search did not include looking to see if documents were given to third parties – including external solicitors involved in the bank's civil case against Lynn.
Deirdre Byrne told Finnegan that she was working as a commercial-underwriting manager in PTSB in 2007 and was involved in some of Lynn's loan applications to the bank.
Comiskey O'Keeffe asked Byrne about her delegated authority to approve loan applications. Byrne said that she would have a “lending limit”, and that anything above this was escalated to someone more senior.
The trial continues before Judge Nolan and the jury.